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Vt. Forced To Cut Spending

Montpelier — Recovery from the Great Recession almost seven years ago is still slogging through Vermont, with lower-than-expected state revenues forecast Thursday that prompted Gov. Peter Shumlin to call for budget cuts.

“This really is no different than when a family thinks they have a raise coming, they get a raise, but the raise is a little smaller than they had projected,” the governor told reporters as he prepared for a meeting at which the heads of the Legislature’s four money committees agreed to downgrade the forecast.

Shumlin called for state agency heads to draft plans by next Friday to reduce their budgets by 4 percent. He said he did not expect the changes to result in state government layoffs, and invited the unions representing state troopers and other employees to submit suggestions for savings.

Meanwhile, Administration Secretary Jeb Spaulding sent a memo to agency chiefs putting a hold on any new hires without his OK and asking that they begin working now to reduce discretionary spending.

An overall spending reduction plan will be submitted by mid-August to the Legislature’s Joint Fiscal Committee, which can approve such changes when the full Legislature is not in session, administration officials said.

State revenues had been projected to grow 4.8 percent from fiscal 2014, which ended June 30, to the current fiscal year, but the revised projection now puts that growth rate at 3 percent. The result is the state will have about $31 million less to spend, but Shumlin called that a modest cut from a general fund budget of nearly $1.4 billion.

Shumlin made the announcement about three hours before consulting economists Tom Kavet and Jeff Carr, who said the recovery from the Great Recession remains sluggish and suffered an apparent reversal in the first quarter of this year.

The economists brief the governor and key lawmakers on the economic outlook and revenue projections each January and July.

U.S. gross domestic product reportedly dropped 2.9 percent during the first quarter of this year, but Kavet said that is likely a “mismeasurement that will ultimately be either revised or ignored.”

While he and Carr said they expected the economy to continue to improve gradually, they cited several areas of weakness, including Vermont’s unemployment rate. The rate is one of the lowest in the country but that’s due at least partly to no appreciable growth in the workforce in recent years.

They also cited continued weakness in the housing market, a key underpinning of the economy. Carr and Kavet attributed that to people, who years ago would have been first-time homebuyers, being too saddled with student debt to start a family or buy a first home.